Palmer & Harvey has ceased trading with immediate effect, leaving its retail customers in the lurch.
Sources at P&H have confirmed 2,500 of the company's 3,400 staff have been made redundant with immediate effect, and all future deliveries are to be cancelled.
The news leaves the wholesaler’s 90,000 retailer accounts without a major supplier half way through the busiest retail period of the year.
P&H business analyst Mark Mellish told betterRetailing: "We had no idea this was going to happen, we were told the takeover was going well and was in due dilligence until talks apparently collapsed last night."
He continued: "We were told not to speak to any retailers or suppliers." Asked if he knew what would happen to retailers depending on the wholesaler, he responded: "I have no idea."
A statement by administrators PWC said it was "a devastating blow for everyone who has been involved in the business". It continued: "The company has insufficient cash resources to continue to trade beyond the short term and the directors have concluded that there is no longer any reasonable prospect of a sale."
The Costcutter Group was locked into a supply deal with P&H, meaning Costcutter, Mace and Simply Fresh all sourced the majority of their stock from P&H.
Retailers told betterRetailing.com they were unaware of P&H's liquidation until late this afternoon.
A statement by a Costcutter Group spokesperson responded: "We have activated our contingency plans to provide alternative sources of supply through appropriate regional and national options.”
The end of the wholesaler comes after repeated failed attempts to find outside investment or another company to take over the business.
A spokesperson from JTI – one of the wholesaler's biggest suppliers and investors – said of its attempts to save P&H: "Regrettably, our considerable efforts were not successful. We have a contingency plan in place and we do not expect any significant interruption in the supply of our products."
Imperial Tobacco said P&H entering administration would cost the manufacturer up to £160m, but added: "We have well-prepared contingency plans which will ensure that the ongoing supply to Imperial's retail customers remains unaffected."
Shabaz Ali, who runs a Costcutter on Redding Road in Falkirk, was due to place an order for around £9,000 on Wednesday for 250 items including tobacco and alcohol.
“I’m going to have cashflow problems. I have a direct debit set up with Palmer & Harvey, which is due to come out on Tuesday, but I’m going to have to buy that stock from a cash & carry tomorrow," he said.
"It’s three weeks until Christmas and this is the time of year I start building up stock. It’s very bad news at a very bad time."
Sat Deo, who owns three Costcutter stores in Yorkshire, said: “I’ve just had an email from Costcutter with the news and saying they are putting a contingency plan into place, but I think retailers are all going to have to make their own journeys to cash & carries. It is not what we need before Christmas when there’s so much else to sort out. We will have to see what is delivered tomorrow.”
Paul Guppy of Holybourne Shop & Post Office in Alton, Hampshire, described the news as a “big shock".
“We haven’t been using them so much recently because the availability has been so poor, but it is going to make getting hold of some products difficult. I usually use them for ambient products, cigarettes and alcohol and it can be difficult to get hold of the ambient stuff elsewhere,” he said.